Poll vault may drive stocks, but how far?

Rally powered by short-covering may prompt selling too

- Ram Sahgal

Stock market engines that roared back on Friday may gather more steam this week, after the Bharatiya Janata Party-led alliance scored a runaway victory in the Maharashtra state assembly election.

However, market participants warned that a short covering-led rally could prompt investors singed by the recent correction to cut losses, potentially limiting the life of the rebound.

For now, they don't expect any significant impact from the indictment of Gautam Adani and other top group officials in the US, over allegations that the conglomerate has termed baseless.

"The market retracement will continue after the spectacular victory of the BJP-led alliance in Maharashtra," said Madhusudan Kela, founder of M.K. Ventures, a financial services firm, adding the recent correction has presented buying opportunities in beaten-down quality PSU stocks in capital goods, defence and railways.

The Nifty and Sensex gained around 2.5% each on Friday as foreign investors covered part of their bearish bets ahead of the state's election outcome over the weekend.

To be sure, the market was near heavily oversold zone, indicating that a bounce was overdue.